Abstract

Seminal models of herd behaviour and informational cascades point out existence of negative information externalities, and propose to ‘destroy’ information in order to achieve social improvements. Although in the last years many features of herd behaviour and informational cascades have been studied, this particular aspect has never been extensively analysed. In this article we try to fill this gap, investigating both theoretically and experimentally whether and to which extent destroying information can improve welfare. Our empirical results show that this decisional mechanism actually leads to a behaviour pattern more consistent with the theory that in turn produces the predicted efficiency gain.

Assessment

Comments and Questions

Anonymous
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paper on cascades

February 15, 2008 - 00:05

I just have one comment. The author talks about negative externalities , however , such externalities could be positive. In this case the conclusions of this paper would be reversed. Moreover, externalities belong to the realm of second best and there should be some discussion of Lipsey Lancaster theorem. I
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...have a feeling that any number of cases can be produced which may support/not support the destruction of information